b. NPV, IRR, B/C RatioA county looks to alleviate traffic delay during peak hours at a four-way stop intersection of twocounty roads during peak hours. Four alternatives are presented below. Using a discount rate of7.5% and a project life of 12 years, calculate the NPV for each alternative. Calculate the IRR forthe alternatives relative to the do-nothing case. Obtain the B/C ratio for the options excluding thedo-nothing case. Which option should the county select? If the discount rate changes to 12%,does the preferred option change?Annual Delay Benefits$0$400,000$800,000$300,000Hint: Please use Excel's built-in financial functions, and be sure to submit Excel equations &AlternativeDo Nothing/BAUConstruction CostsAnnual Maintenance$0$1,300,000$1,600,000$500,000$3,000$7,000$18,000$22,000RoundaboutGrade separationTraffic Signalresults as part of your solutions. Using a single apostrophe before the Excel equation will show usyour equations ('=NPV()).

NPV or net present value is the discounted value of all future cash flows. Project life is 12 years…

Answered: A county looks to alleviate traffic…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Cornell has two options for upgrading their athletic facilities. The offcampus option costs only $2.5 million, but it will require frequent bus service to those facilities at an annual cost that starts at $200,000 and increases by 5% per year (buses, drivers’ and mechanics’ salaries, maintenance, road wear, etc.). Improving the on-campus facilities will cost $5.0 million, but no extra transportation costs are required. Both options involve an estimated annual maintenance cost of $1 million for about 30 years before new facilities will again be needed. Using benefit–cost ratio analysis, determine which option is more economically efficient. Use an interest rate of 10% per year.
Cooney Co. is evaluating the following mutually exclusive projects. The manager has determined that the appropriate discount rate is 6.2% for all the recommended projects. Rank order the projects based on the profitability index. Project A Project B Project C (35,000) (65,000) (86,000) Year 0 1 2 3 55,000 40,000 22,000 22,000 44,000 44,000 35,000
A state highway department is considering a bypass loop that is expected to save motorists $821,000 per year in gasoline and other automobile-related expenses. However, local businesses will experience revenue losses estimated to be $131,000 each year. The cost of the loop will be $8,900,000. Calculate the conventional B/C ratio using an interest rate of 7% per year and a 10-year project period.
Cooney Co. is evaluating the following mutually exclusive projects. The manager has determined that the appropriate discount rate is 6.20% for all the recommended projects. Rank order the projects based on the net present value. Project A Project B Project C (35,000) (65,000) (86,000) Year 0 1 2 3 55,000 40,000 22,000 22,000 44,000 44,000 35,000
The general city population is set to benefit in travel-time savings from a municipal road project amounting to $80,000. The local government will incur an initial spending of $2,500,000 and an operating and maintenance cost of $30,000 per year. This new road will reduce accidents, representing medical savings of $135,000. Consider a 15- year period and an interest rate of 5%. What is the modified benefit-cost ratio of this project?
A highway is to be built connecting Maud and Bowlegs. Route A follows the old road and costs $4 million initially and $210,000/year thereafter. A new route, B, will cost $6 million initially and $180,000/year thereafter. Route C is an enhanced version of Route B with wider lanes, shoulders, and so on. Route C will cost $9 million at first, plus $260,000 per year to maintain. Benefits to the users, considering time, operation, and safety, are $500,000 per year for A, $850,000 per year for B, and $1,000,000 per year for C. Using a 7% interest rate, a 15-year study period, and a salvage value of 50% of first cost, determine which road should be constructed.
A new storm drainage system must be constructed right away to reduce periodic flooding that occurs in a city that is in a valley. Five mutually exclusive designs have been proposed, and their present worth (in thousands of dollars) of costs and benefits are the following. Solve, a. Which system has the greatest B–C ratio? b. Which system has the largest incremental B–C ratio(based on differences between alternatives)? c. Which system should be chosen ?
Your Question : Please introduction and correct and incorrect option explain!
The cost associated with maintaining rural highways follows a predictable pattern. There are usually no costs for the first 3 years, but thereafter maintenance is required for restriping, weed control, light replacement, shoulder repairs, etc. For one section of state highway S102, these costs are projected to be $6000 in year 3, $7000 in year 4, and amounts increasing by $1000 per year through the highway’s expected 30-year life. (a) Assuming it is replaced with a similar roadway, determine the perpetual equivalent annual cost (years 1 to ∞) at an interest rate of 8% per year. (b) Verify your factor-based answer on a spreadsheet in the most efficient way you know.
The city council is considering a proposal about purchasing a new landfill site. Both the current landfill and new landfill would be usable for the next 10 years. The purchase price is $279,000 and the preparatory work will cost $77,800. It is estimated that the new landfill will cost $51,000 less per year to operate than the current landfill. Assume a hurdle rate of 8%. Ignore tax impacts. Required: Calculate the net present value of the new landfill. Should the city council approve the project on financial grounds? Calculate the internal rate of return for the new landfill. Should the city council approve the project on financial grounds?
Cooney Co. is evaluating the following mutually exclusive projects. The manager has determined that the appropriate discount rate is 6.20% for all the recommended projects. Rank order the projects based on the internal rate of return. Project A Project B Project C (35,000) (65,000) (86,000) 44,000 Year 0 1 2 3 55,000 40,000 22,000 22,000 44,000 35,000

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